Sterling vs Australian Dollar has fallen below 1.80 overnight following the Federal Government’s Budget. There were expectations that the measures put in place could push the chance of an interest rate hike out further to next year. Weak housing figures, as well as weak Chinese data out recently, would typically have weakened the Australian Dollar but the reverse seems to have happened this week.
I think one of the main reasons for the strengthening of the Australian Dollar is due to the lack of interest in US yields which investors have bypassed in favour of more riskier currencies including the Australian Dollar.
However, longer term the Budget changes could see the Aussie Dollar weaken against the Pound because the change could have a negative impact on growth.
Today the news for the UK will focus on unemployment figures due out at 930am and the Quarterly Inflation Report at 1030am. The inflation figures will be closely monitored as it provides the Bank of England a bit more detail as to when to change interest rates. It is unlikely that the BoE will change interest rates anytime soon but if the inflation figures come in as expected this could provide the Pound with a further boost.
With problems in the Eurozone this has also led to investors seeking higher yields which is another reason why the Australian Dollar has drifted below 1.80 this week.
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